The Bank of England’s decision to lower the base rate by 0.25% is a welcome shift for many homebuyers. But what does this really mean for mortgage rates, affordability, and stress testing?
Will Mortgage Rates Drop?
A lower base rate typically leads to lower borrowing costs, but lenders don’t always pass on the full reduction straight away. If you’re on a tracker mortgage, you’ll see an immediate benefit. For new fixed-rate deals, banks may adjust rates, but they also factor in long-term expectations. Some lenders had already priced in future cuts, so it doesn’t necessarily equate to a huge overnight drop. The best thing you can do is compare the market, many lenders will have different rates for ‘Loan to Value’ or may have ‘fee or non-fee’ options. Shopping around can be done easily online, or a mortgage broker may be able to help.
How Does This Affect Affordability & Stress Testing?
Lenders often use stress tests to check if borrowers can afford repayments even if rates rise. A lower base rate means slightly less aggressive testing, which could improve borrowing capacity for some buyers.
Does Applying for a Mortgage Feel Daunting?
You may be surprised how helpful and personable a mortgage team can be. Affordability assessment is not something to be nervous about. A good mortgage manager will go through your income and expenditure, really getting under the skin of what is an affordable payment for you. And if its not what you hope for, a good mortgage manager will help you make a plan to achieve your financial goals.
Should You Buy Now?
This cut could be the start of a downward trend, but waiting for bigger drops is always a gamble. If you find a property you like and a mortgage rate that works, it’s worth considering locking it in. Some lenders offer ‘rate switch’ options if rates fall further before completion. While this base rate drop won’t radically change the market, it’s a step in the right direction for buyers. Keep an eye on lender responses and be ready to move when the right deal appears.
If you would like to know more please don’t hesitate to contact me
Danny
